The government is drawing up plans to limit the amount of rent people living in social housing pay next year.
Housing Secretary Greg Clark said that the increase in social rent in April 2023 would be limited to either three per cent, five per cent and seven per cent, because of the cost of living crisis.
The cap would apply to people currently living in social or ‘affordable’ housing – but not to new tenants.
The government has launched a consultation for social landlords – like Southwark Council – and social housing tenants, to have their say on the various options, or suggest others.
At the moment, yearly social rent increases are capped at consumer price index rates + one per cent. That means that, left unchecked, social rents could rise by eleven per cent next year, according to the latest Bank of England forecasts.
For context, in the 2022-2023 financial year, Southwark Council rents went up by 4.1 per cent – following the consumer price index + one per cent formula. The council said its rents were the eighth-lowest in London.
People renting a three-bed home from Southwark Council are paying £117.80 per week on average. Under the government plans, for those people rent could go up to £121.34 a week at a three per cent increase, or £126, at a seven per cent increase.
For comparison, private rents in London rose 2.1 per cent in the twelve months to June 2022, according to the Office for National Statistics, although this looks backwards rather than forwards.
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Clark said: “We must protect the most vulnerable households in these exceptional circumstances during the year ahead.”
“Putting a cap on rent increases for social tenants offers security and stability to families across England. We know many people are worried about the months ahead. We want to hear from landlords and social tenants on how we can make this work and support the people that need it most.”
Despite the rent capping, some are still concerned that the increase in social rents will be too much for some social renters to bear. Pressure group the Social Housing Action Campaign has called on social housing tenants not to pay any rent increases, and argued that the government should set the rent cap at zero.
Although the rent cap will be welcome to people living in social housing – at least in comparison to the alternative – it will have a massive impact on social landlords like Southwark Council.
The rent the council gets goes towards things like repairs and safety measures on its huge stock of homes across the borough, which run to the tens of thousands. If Southwark cannot charge tenants in line with inflation, that effectively means its rental income is being eroded, and there could be less money to spend on maintenance.
Social landlords can apply for exemptions to the rent cap under the scheme, but it seems unlikely Southwark would do that. The council has been contacted for comment.
The Local Government Association, which represents councils like Southwark, and the National Housing Federation, said they understood the squeeze that inflation was putting on tenants, but called for more support for local authorities from the government to help manage the rent cap.
They said: “We are very concerned that a new cap on social housing rent increases will significantly impact on housing providers’ ability to provide critical services for residents and invest in new and existing homes.
“Decisions on the level of rent increases for tenants need to be made by housing providers within the existing government rent policy commitment, ensuring that there is a careful balance between affordability for tenants and investment in the homes that they live in.
“If the Government does take forward a lower cap, then it should provide additional funding for 2023/24 and for future years so that housing providers can continue to safeguard services and meet the country’s future housing needs.”
Take part in the consultation here if you are living in social housing.